July 30, 2019
(Bloomberg) — Blockchain.com, which has created more than 40 million digital-asset wallets, is moving into the trading side of cryptocurrencies with a new exchange.
The Pit, a London-based marketplace, will offer Bitcoin, Ether, Bitcoin Cash, Tether, Litecoin and Paxos. Customers can deposit funds immediately, with trading beginning soon. The idea came from the the boom-and-bust cycle of 2017 and 2018, when exchange performance was spotty at best, Blockchain.com Chief Executive Officer Peter Smith said in an interview.
“After that cycle we stepped back and said, ‘What do we need to do differently next time?’ That’s when you start reinvesting,” Smith said. “We wanted to build a Wall Street or a Chicago-level matching engine,” he said, referring to software that pairs buyers and sellers.
Exchanges for the $248 billion cryptocurrency market have a woeful record of hacks, thefts, fraud and mismanagement stretching to 2014 when 850,000 Bitcoins were stolen from Mt. Gox, the largest Bitcoin site at the time. Services to keep digital coins safe, known as custody, have been slow to develop.
The Pit will execute orders in under 50 microseconds, compared with 200 to 500 milliseconds at most crypto exchanges, Smith said. He declined to identify any banks working with Blockchain.com, saying only that lenders will allow customers to deposit U.S. dollars, euros and British pounds on to the exchange.
The exchange’s servers will reside in the Equinix LD4 facility in London, allowing connections to most of the world’s largest banks and investors.
To help build the market, Blockchain.com brought in Nicole Sherrod as head of trading products. She spent more than 20 years in online brokerages and helped build the Think or Swim trading system at TD Ameritrade Holding Corp.
“I thought I was retired,” Sherrod said in an interview. Then, looking at the crypto marketplace, “I realized there was a tremendous opportunity to do work there.”
Sherrod said she watched as order books dried up and market-makers stepped away during the intensely volatile markets of 2017 when “reliability was a big issue, and then liquidity.” Since then, there hasn’t been much news about digital exchanges improving their systems and robustness, she said.
Blockchain.com claims that 25% of all Bitcoin transactions originate with one of its wallets. The company will encourage users to keep their digital coins in their wallets rather than on the exchange, Smith said.
“The promise of crypto is direct bearer assets” that form “the basis of a self-sovereign economy,” Smith said. The exchange is “an investment in the future of the crypto market.”